Level 3 Chapter 2: Common Interest Ownership Properties Flashcards
Common Interest Ownership Properties
Involve joint ownership with other neighbors, investors, or shareholders.
Types of Common Interest Ownership Properties
- Condos
- Co-ops
- Planned unit developments (PUDs)
- Timeshares
Condominiums
Property in which each owner has a separate interest in their own unit and undivided interest in the common areas. These are popular alternatives to single-family homes for many buyers. They can be apartments that share walls with other units, or stand-alone units clustered on a property. Condo owners only own the inside of their residential unit. For this reason, condos are sometimes called “walls-in” properties (because you own everything from the walls in). So owners own the airspace inside a unit. Owners have a fee simple absolute ownership interest in the interior of the individual unit.
Common Elements
Portions of a shared ownership property not controlled by any one owner or tenant. The land on which the condo is built, the hallways, the hot water heater in the basement, the parking lot, laundry room, the pipes in the walls, the swimming pool, and anything else that is not inside a unit — these are shared property. Owners possess the common elements as tenants in common - they have an undivided interest in them, but can own them in unequal shares. Everyone has the equal right to use all of the common elements, regardless of their proportional share of the ownership. Also, if something breaks inside your condo unit, fixing it is your problem. If something breaks anywhere else, it’s everyone’s problem.
Limited Common Elements
These are owned by everyone, as with other common elements, but are only used by a few owners or even one owner. A common example of this is a parking space.
Homeowners Association (HOA)
Also known as assessments or maintenance fees. These are monthly fees which condo and/or co-op owners pay for common area expenses. Each unit could be responsible for paying the same fee, or fees can be allocated in any other way the condo board or HOA board agrees on.
Covenants, Conditions, and Restrictions (CC&Rs)
Also known as deed restrictions or restrictive covenants, they are rules attached to the property by a developer. Often CC&Rs address things like: How a property can be used, Restrictions on building height, Setbacks, Acceptable renovations, Other limits to what owners can do
Self-Managed Condos
Can be self-managed, meaning the owners, especially the board, are responsible for doing their own maintenance. This can be as hands-on as mowing their own grass or as hands-off as making sure the lawn maintenance company they hired gets paid on time.
Property Manager-Managed Condos
Condos can also be managed by a property manager or management company. Larger buildings will almost always be run by a property manager, and often this company or person will be put in place by the developer.
Pennsylvania Uniform Condominium Act
It addresses: How condos can be formed and regulatory rules around creation and How condos can be run once they’re created. Creating a Condo
A condominium owner or developer must record their condominium. This record should include:
A description of the condo(s)
Unit ownership boundaries
The common elements
By-laws and rules
CC&Rs
If a property is not a condo, but is being turned into a condo, this act also specifies that the soon-to-be-owner follow certain rules:
They must allow residents time to find new housing.
They must allow residents to purchase the property, if they wish.
They must comply with lease and rental regulations during the property transition.
Horizontal Property Acts
The legal rules set out by the Pennsylvania Uniform Condominium Act. A condo owner owns a condo from the walls in, and condos are usually horizontal, apartment-esque properties. So, condo owners typically own horizontal, rectangular spaces of property. And these are the acts that govern that horizontal property.
These are also sometimes called air lots.
Cooperative (Co-op)
A building owned by a corporation where the residents are shareholders in the corporation. Each shareholder has the right to use common areas. Each shareholder also has a proprietary lease for their particular unit, which is a long-term and exclusive lease given to residents and stock owners of a cooperative. Co-op ownership is a unique type of ownership because rather than owning the unit itself, owners have shares of stock in the corporation or cooperative. So co-op owners live in the apartments they lease, but they don’t actually own them. Co-op buildings can be owned either fee simple or leasehold. It’s important to know the difference.
Fee Simple
With fee simple, the co-op corporation owns the building and its full bundle of rights in perpetuity. Though there may be a mortgage (and failing to pay that mortgage would result in foreclosure), the corporation owns the building in the same way a homeowner owns a single-family home.
Leasehold
With a leasehold interest, the co-op corporation is merely leasing the building and/or land beneath, according to the lease terms agreed upon between the co-op corporation and underlying landowner. A leasehold co-op is also known as a ground-lease or landlease building.
In this scenario, the co-op doesn’t actually own the land the co-op is on; they lease it from the owner. Leases can last a while — even 50 or 100 years — but if the lease is up, and there’s no renewal, the tenants will be evicted.
Co-op Board
If co-op owners want to do renovation on their units, they usually have to get approval from the co-op board. Many co-ops have strict rules, enforced by the board, about things like: The number of people who can live in a unit, The type and number of pets allowed, Quiet hours, Carpet coverage (to minimize stompy foot noise from upstairs neighbors), Acceptable renovations, Subleasing
Condops
Combination of condos and co-ops in the same building. Financially speaking, condops are typically run more like a co-op, but they typically have more relaxed rules and a more relaxed environment, much like a condominium. Condops are used in two ways: They contain both commercial and residential property. Condops are owned in two ways: Some properties are owned as condominiums and some as cooperatives.
Planned Unit Developments (PUD)
A subdivision that includes residential dwellings along with nonresidential real estate, departing from normal zoning and subdivision regulations. Recreational facilities may be co-owned by PUD lot owners as tenants in common.
PUD Forms of Ownership
There are also two forms of ownership when it comes to PUDs:
Fee simple interest ownership of the individual unit (including the roof, garage, private yard or patio, and the land beneath all of that).
Tenancy in common ownership of all common areas
PUD Common Elements
Common elements for a PUD development could be things like: Parks, Playgrounds, Athletic centers and gyms, Pools, Parking lots, Roads and sidewalks connecting stand-alone townhomes, Duck ponds, Those weird fountains that spray pond water up from the middle of a pond in fancy developments
PUDs: Townhomes
kind of common interest ownership property. It’s a bit confusing, because a townhouse is a type of structure: more than one story, and usually attached. In some places, townhouses are more commonly known as row houses (or, for a certain type of townhouse, brownstones).
Townhouse developments can be condos, where the owner only owns from the walls in, and the rest of the building and common elements are co-owned by all of the development’s owners.
But more commonly, townhouse developments will be set up as PUDs: Owners own the entire structure and the ground beneath, and then have co-ownership of some common elements.
Timeshares
A form of co-ownership where each owner has use of the property at a different prescribed period of time. This is also known as interval ownership. Each timeshare unit is considered an estate or interest in real property, separate and distinct from all other timeshare estates in the same unit or any other unit. Therefore, estates may be separately conveyed and encumbered.
